October 16, 2021 at 16:10 JST
Prime Minister Fumio Kishida, right in foreground, bows to lawmakers after an extraordinary Diet session at the Lower House on Oct. 8. (AP Photo)
Stoking economic growth and distributing wealth are key policy issues for the Oct. 31 Lower House election.
After former Prime Minister Shinzo Abe returned to power in late 2012, the nation enjoyed nearly six years of economic expansion that saw corporate profits balloon 160 percent. But wages rose only 7 percent. Stock dividends vaulted 88 percent, while corporate cash reserves swelled 52 percent.
Clearly, businesses and those with financial assets reveled in the benefits of the Bank of Japan’s “different dimension” monetary easing and corporate tax cuts while average workers saw no notable improvement in their fortunes.
With economic inequality exacerbated even further by the COVID-19 crisis, it stands to reason that Prime Minister Fumio Kishida has proposed an economic program aimed at stemming the trend and achieving both growth and a more equitable redistribution of wealth.
“I will pay serious attention to this growing inequality and seek to realize new capitalism driven by a virtuous cycle of growth and distribution,” Kishida declared.
But the specifics of his economic program are less than encouraging because they are so similar to the measures adopted by the Abe administration. Their effectiveness is open to doubt.
A proposal to reduce the tax burden on companies raising wages, for instance, was implemented by the Abe administration. While Kishida is trying to sell the idea as a way to expand tax cuts, it is hard to imagine that many companies will be willing to raise in wages, which are difficult to cut back, in exchange for a temporary reduction in the tax load.
A corporate tax cut is limited in its benefits because it only helps companies making profits. If only highly profitable companies offer pay hikes to take advantage of the policy incentive, the problem of inequality could become even worse.
Kishida also promised to provide stronger policy support to subcontractors to rectify the industrial structure that lopsidedly favors large companies in profit-sharing. This is an important policy challenge. But business transactions should in principle be determined through negotiations between the companies involved. Excessive intervention by the government would have a downside.
The minimum wage in Japan is lower than international standards. This is a most urgent problem and the government should be prodded to raise the minimum wages significantly while providing policy support for companies making efforts to bolster productivity so they can adjust to higher wages.
The “Abenomics” economic program introduced by the Abe administration that has remained in place underscored the reality that increased wealth of businesses and the rich does not necessarily trickle down to the rest of society. Many Japanese companies are reporting strong earnings performances despite the pandemic. Japanese stocks have risen to their highest levels in years. There is a compelling case for policy measures to enhance the function of tax as a means to redistribute income.
During his campaign for the ruling Liberal Democratic Party’s leadership election, Kishida promised to increase taxation on income from financial investment. But this proposal is missing from the LDP’s campaign platform for the Lower House election. Has he forgotten his own pet theory that further economic growth is impossible without a better distribution of wealth? If he focuses on growth in the short term, his economic policy will be no different from the policies espoused by Abe.
The opposition parties also place importance on distribution. The Constitutional Democratic Party of Japan, the largest opposition group, has promised to raise the maximum income tax rate in addition to raising taxes on large companies and capital gains. The Democratic Party for the People also called for a higher tax on the wealthy.
But many of these policy planks are no more than political slogans. To help voters with their decisions at the polls, the parties need to make clear through campaign debates their specific plans to achieve these policy goals along with timeframes for implementing them.
--The Asahi Shimbun, Oct. 16
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